Gazans seethe over taxes and blackouts

GAZA CITY (Reuters) -- Hamas faces growing discontent in its Gaza stronghold because of renewed tax hikes and the mismanagement of a power crisis that has led to lengthy blackouts across the enclave.

Traders who import goods from Israel and the West Bank say Hamas authorities have introduced additional fees beyond the usual tax they collect, putting their businesses at risk and threatening the livelihoods of thousands of workers.

Hamas says the increase in levies is meant to protect homegrown products. But local analysts believe the group has been forced to tighten the fiscal screws at home because of a drop in funding from foreign allies, notably Iran.

Whatever the reason, many Gazans are fuming. A power crisis, sparked by a restriction on fuel smuggled into the Palestinian territory from Egypt, has only added to a widespread sense of discontent amongst the 1.7 million-strong population.

"We don't have what other human beings have. There is no electricity, no water and my husband tells me about a new tax every day," said Gaza housewife Umm Abdel-Karim.

"Whoever is unable to serve the people should quit," she added.

Hamas, which doesn't recognize Israel, won parliamentary elections in 2006 and immediately entered into a dispute with the Western-backed president, Mahmoud Abbas.

The Islamist group seized control of Gaza 18 months later after a days-long civil war with forces loyal to Abbas, who has retained control of the West Bank.

Israel maintains a land, air and sea blockade of Gaza but this has not prevented the group from consolidating its power in the Mediterranean enclave.

However, public anger over electricity blackouts and tax increases comes at a delicate time for Hamas, which is struggling to overcome unprecedented internal divisions over efforts to reach out to Abbas and end their long-running feud.

"Our leaders are unable to offer us a good life, or even to bring about (Palestinian) reconciliation. So what are they good for?" said Abu Ali, 47, an unemployed construction worker.

Stranded trucks

In a rare show of public defiance, a group of local merchants last month refused to pay extra import taxes, leaving 22 trucks loaded with goods sitting at the Israeli-controlled Kerem Shalom border crossing for three weeks.

The products have since been transferred into Gaza, but at least some of it might never make it to the supermarket shelves.

"I will not pay these taxes. Let them come and pour the stuff onto the ground," said businessman Salah Al-Maqadma, livid at being told by Hamas he had to pay 20,000 shekels for each of his three trucks carrying a Jordanian cola, called Nice.

"If I added this extra tax onto the actual price of the goods, store owners would not buy them because they would not be able to sell them to the customers," Maqadma said.

Hamas initially tried to impose additional charges on at least 17 kinds of goods, including clothes for women and children, biscuits, juice, furniture and coffee.

It has since reduced that list to four and is re-evaluating the other 13, telling importers to pay up to 500 shekels on every 1,000 liters of soft drinks brought in, 2,500 shekels on every ton of potato chips, 750 shekels for every ton of office furniture and varying tariffs for items of clothing.

"The fees are small and symbolic and ... will not influence prices," said Hamas's deputy economy minister, Ibrahim Jaber. He said that the administration needed cash for key projects.

"The government has great responsibilities in education, health, security, judiciary and infrastructure ... so the money goes back to the people."

The latest levies follow additional fees slapped on four commodities much in demand that pass from Egypt through a warren of smuggling tunnels; those have been raised to 20 shekels for a ton of cement, 10 shekels for a tonne of gravel, 1.4 shekels for a liter of fuel and 50 shekels for each ton of steel.

"Tunnel owners protested for one day, but in the end they resumed work because the Hamas government rejected their demand to cancel the tax," tunnel owner Abu Islam told Reuters. But he added that some merchants simply canceled their shipments.

The fiscal demands suggests that Hamas, which is spurned by the West over its refusal to recognize Israel and renounce violence, is struggling to make ends meet.

According to its opaque 2011 budget, Hamas' budget for Gaza was estimated at $769 million, with revenues raised locally expected to amount to $150 million.

Foreign donations from various allies make up much of the shortfall, with Iran believed to have been the major contributor. But diplomats say Tehran has closed the taps in retaliation at Hamas' refusal to back their embattled ally, Syrian President Bashar Assad. Hamas ditched Assad last month, publicly supporting the Syrian revolt.

Going dark

The split between Abbas and Hamas has meant there have been no elections in the Palestinian territories for six years and it is hard to gauge the level of support for Hamas in Gaza. However, local tradesmen say no matter what their political affiliations, the new demands risk smothering the economy, which is only slowly recovering from a 2008/09 war with Israel.

No one in Gaza can escape the new taxes as all roads leading to the border are monitored by Hamas officers, who inspect every passing truck and donkey cart.

Western officials say Hamas' need for tax revenues is also at the heart of the ongoing power crisis.

Hamas came to rely heavily on fuel smuggled into Gaza from neighboring Egypt, but Cairo halted the trade in February, apparently annoyed that subsidized diesel earmarked for Egyptians was being siphoned off into Gaza.

Critics say Hamas has refused to diversify its supplies because it was able to impose high levies on the illicit Egyptian oil. Fuel imported legally via Israel is handled by Abbas' Palestinian Authority, which imposes its own levies, preventing Hamas from adding any further surcharges.

"The reason for this crisis is ridiculous and has to do with Hamas insisting on not buying from (Abbas's) Palestinian Authority via Israel," the NGO official said, asking not to be named because of the sensitivity of her dealings with Hamas.

"When fuel is procured from the tunnels, Hamas implements its own tax system, therefore generating its own revenue."

There have been no street protests over the blackouts because Hamas cracks down on them, but the fury is apparent on social sites such as Facebook and Twitter, with a barrage of complaint over electricity cuts lasting 18 hours a day.

"People are going about their lives without even the minimum rights to freedom and dignity," Gaza writer Mustafa Ibrahim said in a blog that was re-printed on several Palestinian websites.